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BLACKSTONE MINDMELD: DON’T BLAME US — From a person close to Blackstone on an New York Times story highlighted in M.M. yesterday citing Blackstone and other Wall Street firms for the recent run-up in house prices: “It is ridiculous to blame Blackstone's purchasing of post-foreclosure homes for the rise in home prices. First, home prices are rising because existing homes are priced favorably relative to new homes: new home prices nationally are 37 percent higher than existing home prices. Second, Blackstone's home purchases are a drop in the bucket nationally. …

“Blackstone owns 28,000 homes, representing .02 percent of all US homes (out of 115mm in total) and it bough 23,000 homes over the past 12 months, representing .4 percent of home sales during that time (5.6mm total US home sales). And finally, if the downward spiral of home prices in a neighborhood is arrested and reversed by investors fixing up abandoned foreclosed homes, isn't that a good thing?"

M.M. MINUTE: STOP WORRYING ABOUT INTEREST RATES — Harris Private Bank’s Jack Ablin tells M.M. that recent panicky stock market movements based on the fear of rising interest rates and an end to Fed easing are unwarranted: “I think the market can withstand higher interest rates because equities are so cheap relative to bonds … So my real fear would actually be lower interest rates that would suggest the economy is weakening. Higher rates would be coupled with stronger economic growth.”

On the economy, Ablin said he was starting to get worried again. “I’m seeing across a lot of the data series that the trajectory of growth is slowing, from the [purchasing managers index] data to retail slowing down. It unfortunately seems like the effectiveness of the Fed’s quantitative easing is starting to wind down.” Ablin’s preferred model shows a weak jobs number Friday but it’s been off lately. “And I hope I’m wrong again this time,” he said.

M.M. HEARS: CORKER TO BACK WATT? M.M. hears that Sen. Bob Corker (R-Tenn.) has suggested to some Democratic colleagues that he might support Rep. Mel Watt’s nomination to head FHFA if they in turn back his efforts, with Sen. Mark Warner (D-Va.) and others, to liquidate and replace Fannie Mae and Freddie Mac. A Corker spokeswoman said, "Senator Corker is not involved in a deal to confirm Watt. He was very, very disappointed when Watt was nominated, saying, 'I could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the hen house.' His position has not changed."

BIG IDEA: FORGET WASHINGTON DYSFUNCTION – Eurasia Group’ David Gordon and Sean West: “There is a vigorous debate under way about just how much drag political gridlock is exerting on the U.S. economy. To which we can only say: Gridlock? What gridlock? Beneath the obvious dysfunction and partisan fireworks of Washington, the building blocks of a strong U.S. economic and strategic resurgence are quietly moving into place. Fortunately, the capital's hidden consensus doesn't depend on political goodwill … but on the two parties' vigorous pursuit of self-interest. The predicate of economic growth is the discovery of vast U.S. natural gas and oil reserves and the development of technologies to exploit it. Neither party has much incentive to block rapid hydrocarbon development, which can generate jobs and power the economy. Democrats and Republicans can realize the fruits of the energy boon simply by staying out of the way.

“Environmental groups remain concerned about the effects of hydraulic fracturing on water quality, but their worries have been overrun in the rush for an infrastructure and industrial resurgence accompanied by blue-collar jobs at good wages. On trade, a similar story is emerging. … Obama, who leads the more protectionist party, has been slow to embrace an aggressive agenda but is now slowly beginning to move on trade. Once Obama moves the ball, Republicans will encourage rather than oppose him, and even a small push on trade can generate potentially startling results.” http://bloom.bg/16IHthV

POLL BLAST: 47 PERCENT DON’T BELIEVE OBAMA ON IRS — Bloomberg’s Mike Dorning: “Almost half of Americans say President Barack Obama isn’t telling the truth when he says he didn’t know the IRS was giving extra scrutiny to applications of small gov’t groups seeking tax-exempt status, according to the latest Bloomberg National Poll of 1,002 adults conducted May 31 — June 3. … 47 percent of Americans say they don’t believe Obama compared to 40 percent who say he is being truthful. … 53 percent of political independents say Obama’s explanation is untrue; 34 percent believe him. … Obama’s job approval rating declined to 49% from 55% in the last Bloomberg pool in February.” http://bloom.bg/18SZt99

THIS MORNING ON POLITICO PRO FINANCE – Kate Davidson and MJ Lee on Sen. Portman’s efforts to find a Cordray compromise … Zachary Warmbrodt on foreign banks and the derivatives “push out” debate … To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD WEDNESDAY MORNING — Not all M.M. readers are so sure the Heat will dominate the NBA Finals. J. David Williams emails: “San Antonio is rested. Also, they played much more consistently in the playoffs. Your guesstimate (5 games/ Heat) is overly optimistic. Pop's Boys will prevail.” … And Dean Aguillen argues: “You buy into the Heat hype? … The Indiana series showed that the Heat are weak on the inside. Also no one can ‘stop’ LeBron but who on the Heat can stop Tony Parker? If he doesn't score he'll get 18 assists again.” As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.

NEW THIS MORNING: IIF REPORT – Institute of International Finance (IIF) this morning released a report the groups says “responds to mounting concerns in both the financial services industry and regulatory community that support is waning for global cooperation and coordination across financial regulations and outlines 16 IIF recommendations for action through all stages of the regulatory cycle” http://bit.ly/10XppZq

IRS HIT ON WASTEFUL SPENDING — POLITICO’s Rachael Bade: “The hits keep coming for the IRS. … A watchdog report released Tuesday includes potentially embarrassing examples of spending at conferences, including $17,000 paid to a keynote speaker whose specialty was painting unique pictures. He produced images of Michael Jordan, Bono, Albert Einstein and Abraham Lincoln at the IRS event.

Agency employees received hotel upgrades and a deputy commissioner spent five nights in a two-bedroom presidential suite at the Anaheim, Calif., Hilton. … And, of course, the IRS spent about $50,000 producing parodies of ‘Star Trek.’ In total, the Treasury Inspector General for Tax Administration found that the IRS spent about $49 million on conferences between 2010 and 2012. It’s a dollar figure that has shocked many in Washington. http://bit.ly/17ZK47h

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TREASURY ON IRS CONFERENCE SPENDING — Per Treasury official: “Under Treasury leadership, the IRS has dramatically reduced its conference spending. Between FY 2010 and 2011, IRS spending on large conferences was cut by over 80 percent from $37 million to $6 million per year, reflecting the Administration’s aggressive push to reduce federal spending and to promote a new culture of efficiency. Between FY 2005-09, the IRS spent an average of $20 million each year on large conferences, and by contrast, in FY 2012, it spent under $5 million.” Chart: http://1.usa.gov/14ujeNq

TRANSITIONS: WEXLER TO JPMORGAN – JPMorgan has hired Trish Wexler of VOX Global, a veteran of the Durbin amendment wars, to serve as New York-based senior VP of communications overseeing consumer banking PR. Wexler will report to JPM’s Kristin Lemkau, who handles commercial banking but also manages a lot of the top corporate PR issues. Wexler, a New Jersey native and Yankee fan emails: “I’ve been working with the financial services industry through coalition work since the mid-1990’s, so I’m really looking forward to being part of the Chase family at this very exciting time in its history.”

ALSO TODAY: PATENT TROLL MEETING — Per release: “The National Retail Federation on Wednesday will host a meeting of dozens of groups ranging from retailers to banks to the entertainment industry concerned about frivolous patent infringement claims. … The meeting emphasizes the fact that ‘patent trolls’ are going after more than just tech companies, with the retail industry as one of their largest targets.”

TOP SPOOKY STORY: RETURN OF THE SYNTHETIC CDO — WSJ’s Katy Burne on pg. A1: “Investors are once again clamoring for a risky investment blamed for helping unleash the financial crisis: the synthetic CDO. In a sign of how hard Wall Street is trying to satisfy voracious demand for higher returns amid rock-bottom interest rates, J.P. Morgan Chase … and Morgan Stanley … bankers in London are moving to assemble so-called synthetic collateralized debt obligations. … Like their crisis-era predecessors, the new CDOs would be sliced up into different levels of risk and returns. Investors who want a chance at the highest returns would have to buy the riskiest slice.

“While spreading risk in some ways, synthetic CDOs also can multiply the financial damage if companies fall behind on their debt payments. During the financial crisis, CDOs pegged to soured mortgage loans caused losses to careen around the world.

Their catastrophic impact was denounced by many lawmakers and investors, and the market for all kinds of highly engineered financial instruments evaporated. Some details of the deals being worked on at J.P. Morgan and Morgan Stanley aren't clear, including the size of the CDOs and which investment firms have expressed an interest in buying slices of them.” http://on.wsj.com/12rNNca

WHY WALL STREET SHOULD PRAY DODD-FRANK GETS FINISHED — American Banker’s Barbara A. Rehm: “The next 18 months are critical to the industry's future. If federal regulators do not get the bulk of Dodd-Frank's provisions in place by the end of 2014, Congress is likely to take another, tougher whack at reform. It will make the 2010 law look tame by comparison. For starters, lawmakers will tackle too big to fail either through asset caps or straight-out breakups. Not far behind will be moves to resurrect the wall between commercial and investment banking. … The next reform law will finally consolidate oversight of financial companies into a single agency.”

ALSO FOR YOUR RADAR –

BETTER MARKETS ON CFTC FUNDING — Better Markets CEO Dennis Kelleher:

“The House committee vote to slash funding for the CFTC is indefensible. It puts American taxpayers at risk of another financial meltdown from the too-big-to fail Wall Street firms that caused the last crisis. Wall Street is a high crime area and the CFTC is a front-line cop on the Wall Street beat. No one can claim to be for financial reform or for protecting Main Street and be against full funding of the CFTC

FIRST LOOK: CREDIT CARD REPORT — New issue of the The Credit Line, an American Banker’s Assoc. publication, “explores all of the ways in which credit cards contribute to economic growth and job creation.” http://bit.ly/11CzqKl

GSE REFORM OUTLOOK — Compass Point’s Isaac Boltansky on the Corker/Warner proposal which could replace Fannie and Freddie with a Federal Mortgage Insurance Corporation: “As with earlier proposals, the effort calls for private investors to be placed in the first-loss position while the FMIC would provide explicit reinsurance on the uncovered portion of the security. This effort represents the most concrete legislative step towards GSE reform since the entities were placed into conservatorship but, in our opinion, is only one procedural step forward in the long, winding road to GSE reform.

… This legislative effort will aim to accomplish three things: (1) foster a more practical and specific discussion regarding GSE reform; (2) solidify the FHFA’s ongoing efforts to standardize terms and practices in the secondary market; and (3) facilitate a path for the federal government to slowly shrink its footprint in the nation’s mortgage finance market.”

TECH BLINK: SAMSUNG WINS ROUND VS APPLE — FT’s Tim Bradshaw in Palo Alto, California: “Apple faces an import ban in the US on certain models of its iPhone 4 and iPad 2, as well as older devices, after a federal agency found that they infringed Samsung’s patents. The ruling by the US International Trade Commission on Tuesday reverses an earlier decision by the agency last year and marks Samsung’s first major win against Apple in America in their wide-ranging legal disputes …

“The ITC said its ruling was ‘final’ and that it had terminated its investigation, but Apple could appeal against the decision to a higher authority. … Any bans ordered by the ITC are subject to a 60-day window, during which they are reviewed by the US president before they come into effect. If Barack Obama does not review the ban, Apple may appeal to the Federal Circuit and ask for an immediate stay. “ http://on.ft.com/11X7VkK

That figure is an estimate of how much the hedge-fund giant generates annually in trading commissions, financing fees and an array of other payouts to banks and other financial firms, according to more than a dozen representatives of Wall Street banks, brokerage firms and others that do business with SAC or are familiar with details of its operations. The firm is by far the biggest hedge-fund customer on Wall Street …

But the payouts are more complex than the basic fees required to process and finance trades for a big hedge fund.

“In doling out its trading business, SAC rewards brokers and bankers who share investment ideas or set up meetings with company executives, doctors and political analysts, according to fund documents and people familiar with SAC's operations.

SAC's connections also cover a broad swath of Wall Street. A 2010 SAC document reviewed by The Wall Street Journal says the firm has more than 100 ‘sell-side relationships,’ referring to companies that sell securities and financial services.

But concerns on Wall Street about how much of the SAC-generated business could evaporate, at least temporarily, have grown in recent weeks as the firm has faced an intensifying insider-trading investigation.” http://on.wsj.com/19Hvobv

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